Mar 17

Lloyds to Boost Small Business Lending

Lloyds Banking GroupThe Lloyds Banking Group has announced that it intends to significantly boost the amount of money it lends to small and medium sized enterprises (SMEs). This year, it is planned that lending will increase by £1 billion.

The lending boost is not the only change Lloyds are introducing with the aim of making things easier for smaller businesses. There is a limit to how much money local managers can lend to this type of business without seeking central approval. This limit currently stands and £500,000, but the bank has now promised to double that figure. As a result, SMEs will have access to potential lending of up to £1,000,000 without the need for local managers to seek approval.

These changes come as part of a new initiative that the bank has recently announced. Its “SME charter” is designed to help smaller businesses and start-ups to benefit from better lending opportunities with the Lloyds Group. Overall, the bank has vowed that it will help 100,000 new firms to get started in business over the course of this year.

For many small business owners and entrepreneurs, the new SME Charter and the commitments it contains will come as welcome news. Recent reports have suggested that a large percentage of SMEs and new start-ups are funded by personal savings or loans from family and friends due to the difficulty of obtaining backing from banks.

Furthermore, it was recently claimed by the economy committee of the Scottish Parliament that the UK needs new credit sources to be made available to SMEs. According to the findings of the committee, about 70% of lending in 2012 came from Bank of Scotland or RBS. In light if these figures, the committee said that the industry would benefit greatly from increased competition. It also suggested that enterprise agencies need to build a more comprehensive knowledge of the various finance models available.

The Lloyds Banking Group includes a number of well-known high street names in banking and finance. As well as Lloyds TSB, the group also includes Bank of Scotland.

Alasdair Gardner, managing director of Commercial Banking for the Bank of Scotland, expressed his support of the new SME Charter. He said that it “sets out the pledges we are making to our customers.” Gardner went on to say: “We will be fair and transparent in all of our dealings with our customers; and will provide broader support through our relationship managers and business specialists, as well as a growing number of business mentors.”

 

 

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Feb 11

Barclays Cutting up to 12,000 Jobs

Barclays LogoBarclays has announced plans for up to 12,000 jobs to be cut in an effort to reduce costs. The move has attracted criticism however. At the same time, it was revealed that bonuses have been upped, leading many to suggest this should have been the priority source of cost savings instead of job cuts.

The bank currently employs approximately 140,000 staff. Between 10,000 and 12,000 of these are going to be cut as part of the current push to save costs. 7,000 of the jobs cut are within the UK. It is claimed that 820 of the lost jobs will be at senior management level, including 600 directors and 220 managing directors. About 400 of senior management-level cuts will affect staff from the bank’s investment wing.

It is claimed that around half of the staff who are being shed have already been told. These job cuts follow on from similar cuts last year, when 7,650 roles were cut.

It has, however, been announced that the total bonus pool for 2013 was £2.38 billion. This represents a rise on 2012′s bonus pool, which was £2.17 billion. This has caused some controversy, as many feel it is inappropriate for a bank to cut jobs in order to lower costs while at the same time increasing the money paid in bonuses.

According to Chief Executive Antony Jenkins, defending the situation; “At Barclays, we believe in paying for performance and paying competitively.” Jenkins voluntarily waived his own bonus.

The bank attracted criticism from the Institute of Directors. The organisation’s Director of Corporate Governance Roger Barker said: “In 2013, the bank paid out £859m in dividends compared to a staff bonus pool of £2.38bn. The question must be asked – for whom is this institution being run?”

Barker added “It cannot be right in any business for the executive bonus pool to be nearly three times bigger than the total dividend pay out to the company’s owners. ”

According to Gareth Hunt, analyst from Canaccord Adams, the move puts the bank’s pay-to-income ratio noticeably above the average figure for the industry. The average for 2013 stands at 40.2%, compared to 43.2% for Barclays. This compares to 2012 when Barclays’ figure stood at 40%, and is far above the bank’s target which is in the mid-30s. Barclays maintains that they are still aiming for a figure in the mid-30s ultimately, but defends the decisions made in the short term.

Barclays insisted that the increase in the bonus pool was in shareholders’ interests in the long term.

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Jan 23

Payment Protection Insurance

The PPI scam has become a widespread phenomenon with billions of pounds being paid in compensation to those who had been sold payment protection insurance wrongfully or inappropriately. There are many factors involved in making a claim for a PPI refund. It is sometimes possible to make a claim for refund if you have already claimed on the actual PPI policy in the event of not being able to make your borrowing repayments, but the chances of a refund are less. Knowing about the PPI basics will help you know more about the eligibility you possess.

Saving Money on Payment Protection Insurance

If you have PPI that is bought along with a loan, you will be paying a huge sum as due. If you can get the same cover by paying less, change over becomes easy.

  • For instance, a standalone policy is markedly cheap when compared to the PPI taken along with a loan. A PPI guide will help you know how you can get a better deal without paying expensively for the insurance cover.
  • In case you have a PPI policy with a loan, the provider concerned should allow for the PPI to be cancelled. You can substitute it for standalone policies which will cost you only one third of the fee.

While you change over to a new policy, you should be careful as many policies do not include any pre-existing conditions that are present at the time of the policy. This will end in a loss for you if you throw a blind eye.

Reclaiming PPI

In case you have reclaimed a refund for your PPI from your lender, your insurance will cease to be in effect. When you reclaim, it denotes that the policy is not suitable for the requirements you have. You should get PPI help towards reclaiming only when you are sure that the insurance is not suitable for you.

Mis-sold PPI needs to be addressed in the proper manner. Though PPI policy offers a solid insurance cover, it is not for everyone. In case you have been mis-sold, you need to approach your loan provider directly or a PPI claims company to make a claim for a PPI refund.

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Dec 20

Co-Operative Bank Stable Again

Cooperative_BankAfter months of instability and uncertainty, the Co-operative Bank has once again managed to stabilise itself. The discovery of a £1.5 billion hole in the bank’s capital in June led to serious concerns about its future.

The bank once again looks set to continue operating. The bank has now successfully completed its Liability Management Exercise (LME), which has generated equity from £1 billion worth of bondholders’ capital. After a court meeting and series of votes from bondholders, this key recapitalisation move has now successfully been put in place.

The remaining half a billion pounds in the equity hole shall be filled through a combination of sources. This will include funds from capital sales, savings on interest, and funds from majority stakeholder the Co-operative Group.

However, as a result of the LME, the institution is now no longer purely “The Co-operative Bank.” While the Co-operative Group shall remain the single largest investor and the brand shall remain in place, the bank’s shares will now be divided with other stakeholders. The Co-operative Group previously held complete ownership of the bank, but now own just 30% of shares.

The remaining 70% of shares will be divided among bondholders such as Monarch Alternative Capital. However, it is worth noting that no more than 9.9% of the bank’s equity will go to any single stakeholder. As such, while the Co-operative Group’s ownership is significantly reduced, they will still be the biggest single shareholder more than three times over.

The Co-operative Group’s ethical remit will also remain in place, having been incorporated into the articles of association for the bank.

While the bank’s future now looks more secure, there is still a lot of work to do. When the LME was unveiled last month, head of the bank’s management team Niall Booker confessed that it could take five years before the bank once again turns profitable.

The reputation of the bank has also been significantly damaged. Alongside the significant financial instability the bank has experienced, people’s opinions have also been tarnished by allegations of Class A drug use against the bank’s former chairman. In the wake of these embarassments, the bank has seen the loss of some customers.

The bank now faces several further steps. 15% of the bank’s branches are to be closed. This represents almost 50 individual branches out of the bank’s total of 324. The bank’s IT systems are also set for a massive overhaul.

The bank is also set to enter into negotiations with the Financial Conduct Authority, regarding a potential listing on the stock market next year.

 

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Oct 30

Energy companies’ price rises under question

Following the announcement from 4 major Energy suppliers to increase their prices to approx. 9.1% due to the price of fuel from their supplier has risen by 4%. A review will be undertaken in March/April 2014 to look into this further. The person who is currently deputising as Head of Ofgem stated, “We will look at all aspects that affect competition in the market”.

Centrica said it doesn’t think this will be beneficial as this has been done before many times and said “if it’ll take another inquiry to improve trust then we are supportive”.

1SSE’s managing director, William Morris spoke of a 4% rise in wholesale costs in the last year, highlighting that government and environmental plans cost 13% more now, while the cost of getting energy to homes has also increased by 10%. However Ofgem have explained that wholesale price rises have been behind inflation, with statistics showing that this should impact household bills by just £10 more on one at £600. Meanwhile Ed Miliband, leader of the Labour party said that the reasons for these price rises are “a list of excuses”.

MPs came to question whether price rises were because the energy companies were purchasing energy from different areas of their own business, in response chief executive of E.On, Tony Cocker said “There is no cross-subsidy between the two businesses. We operate them as stand-alone businesses,” he also said “We’ve invested 100% of what we have earned in the last five years from generation”.

Stephen Fitzpatrick believes that the large energy companies were overcharging their customers by 10% and said “We’re all trying to tack down where this money is going, but you will never find it,” he continued “These guys are the best filibusters in the business.”

MP Ian Lavery asked “Do you understand that the people in this country do not trust you?”, to which Tony Cocker responded “I completely agree with you… But we have worked very hard to improve our business and simplify our tariffs.”

A review will take place to look into the energy market’s annual competition test with Ofgem, the Competition and Markets Authority and the Office of Fair Trading overseeing it.

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Sep 21

Criminals who took control of bank computer system arrested

Eight men have been arrested by the police after they gained access to a Barclays branch’s computer. The gang involved took approximately £1.3 million through the computer from Barclays and were arrested for accusations of conspiracy to defraud UK Banks and the conspiracy to steal.

The gang managed to gain access to the computers when a supposed IT engineer went to the North London Barclays branch claiming that he was meant to do computer repairs. The Metropolitan Police have said that while there the disguised man connected a device to the computer which housed a 3G router as well as a mouse, keyboard and video. By doing this the gang could divert money to their own bank accounts from outside the branch due to the device’s internet capability. Devices such as these are often used by business people to log on to computer systems at work from another place.

1Mark Raymond, Detective Inspector of the Central e-Crime Unit commented: “Those responsible for this offence are significant players within a sophisticated and determined organised criminal network, who used considerable technical abilities and traditional criminal know-how to infiltrate and exploit secure banking systems.”

In the police’s endeavour to solve the crime they scanned addresses in London and Essex, taking money and items purchased with the crime related  money as well as “thousands of credit cards”, according to the official statement.

This criminal strategy was also set to be used on a Santander branch recently, but was stopped when the police discovered the plan. 4 individuals out of the 12 arrested were charged with conspiracy to steal. The gang had an alleged base in London to work from which directed much of their criminal activities involved in the plot. The base was found by the police as they conducted their searches.

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Aug 05

Interest rates for Savers plummet by £850 million

From January, close to £850 million has been cut by Building Societies and Banks from the potential annual interest that savers could receive, a Bank of England report details.

These cuts have strong correlation with vast profits Britain’s major banks have made in the first 6 months of 2013, totalling billions of pounds. The Bank of England’s Base interest Rate however has remained unchanged at 0.5% compared to the number of cuts banks and building societies have had to make which is estimated to be over 750, compared to the 86 cuts made in 2012.

Long term savings interest has reached a nine-year low according to Bank of England Statistics, with a recent cut being the interest rate paid for one-year bonds, which has dropped to an average of 1.85% from 2.06%.

A joint total of £1 billion was estimated to have been reduced for fixed-term bonds that end in 2013, according to HSBC. With the average interest rate for easy access accounts being 0.97% somebody saving £50,000 for a year can expect to get a mere £485.

From the report it also appears that loyal savers are not exempt from the cuts and have suffered reduced rates as well, with banks and building societies profiting off of the 0.17% cut. The report highlights that while there is a total of £496 billion in easy access accounts, £843 million of annual interest has been lost.

This report, showing in detail the cuts banks and building societies have made to savings accounts, is revealed at  a time where banks have started to declare their profits, with Lloyds Banking Group estimated to have profits £2.3 billion and Barclays having received £3.6 billion in profit.

Savings champion director, Anna Bowes commented on the figures: “These figures show how much Funding for Lending has hurt savers. Not only has this removed the need for providers to attract new customers, but it has had a knock on effect on the back-book business of existing customers.”

Savingschampion.co.uk also uncovered that the amount of rates cut every month has risen from the start of the year which coincides with the rise in profits major banks have been having.

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Jul 02

The Virgin ISA launch

The current inflation measure is at 2.7%.  This means that in real terms the only way not to lose money is to go for a tax free Isa which pays 2.7% or higher.

The recently introduced Virgin cash Isa which has a fixed rate does exactly this should savers agree to their money being tied up for a five year period. The deal offered by Virgin is the best which can be found on the Isa market. The bank also offers 2% to savers only wishing to tie up their money for a year and 2.2% for those willing to put their money aside for three years. All the Isas require a £1 deposit and admit in transfers of previous years allowances from Isas. Moreover, deposits can continue to be made so long as bonds are on the market available to new clients.

1Currently there are no available saving accounts which can beat inflation. In order to match the going rate, a standard rate taxpayer will need an account which pays out 3.38% a year with a higher rate payer needing a minimum of 4.5% a year. The new Virgin scheme does not match these figures as it only pays 1.75% for the one year fixed term and 2.2% for the longer three years with its highest payout being 2.75% subject to savers agreeing to part with their money for a five year term.

VERDICT

The verdict on the Virgin Isa is that it is a clear market leader; however this does not make it suitable for all savers. Savers who are discouraged by the five year lock up can opt out for Tesco Bank’s fixed one year Isa which pays 2.05% and also allows previous years’ allowance to be moved into the new Isa. However, the most popular cash Isa which has easy access is that offered by Nationwide which pays 2.25% and can be opened with as little as £1 but does not allow for the transfer of a previous Isa allowance. SavingsChampion.com’s Susan Hannums says that the Virgin Isa is one of the best on the market due to the very low opening balance required as well as the fact that there are no withdrawal restrictions.

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Jun 14

Lloyds Distancing Itself from Call Centers After PPI Crisis

Lloyds is trying to repair its reputation after the aftermath of the payment protection insurance (PPI) scandal. Their reputation has taken an even bigger blow after it was found that they were working with a call center that was denying a large number of PPI claims in th UK. Lloyds said that it was just as discouraged with the findings as its customers were and is trying to distance itself from this.

Allegations of Maleficence

Many customers were denied claims that should have been approved. An undercover reporter worked at the bank and said he was instructed to deny the following types of claims:

  • They were told to deny claims that were filed by PPI claims companies
  • They were told to reject customer complaints that alleged fraudulent selling practices
  • They were told to use a PPI calculator to determine the value of the claims and reject any that seemed expensive.

This reporter’s findings sparked rage amongst customers and regulators. They demanded answers and Lloyds has said that it is going to resolve them.

Steps towards a Resolution

A spokesperson for Lloyds said that they have fired Deloitte, the auditor responsible for managing the center. The spokesperson said that the employees at the call center were trained by Deloitte and their practices do not reflect the bank’s corporate policies. The official said that all Lloyds PPI Claims will in handled in-house and they will not be working with another call center to ensure a similar issue doesn’t arise in the near future.

Deloitte has said that it has not been notified of the reasons Lloyds terminated the contract. However, the auditor didn’t allege that Lloyds was being disingenuous with its statements.

Customers Urged to Resubmit Claims

Richard Lloyd, the executive director of Which?, is urging customers who have had claims rejected to refile against Lloyds. Customers are advised to submit their claims to the bank first, but they can still resubmit to the Financial Ombudsman Service if they are rejected again.

Lloyds agrees with the director’s advice. They said that they are committed to helping customers receive PPI compensation they deserve and will make processing these claims a top priority.

Repairing Brand Damage

Lloyds had suffered substantial branding problems after the PPI crisis and the recent scandal at the claims center. They said that neither of these concerns are indicative of the bank’s integrity. The bank will work to resolve them so they can regain their customers’ trust.

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May 17

A few points on withdrawing money abroad

Whether travelling abroad for business purposes or for a holiday, sometimes withdrawing money abroad can come with its own concerns and pitfalls.

The key point here is to beware of fees and exchange rates when making cash withdrawals at an ATM abroad. Often, using your credit or debit cards abroad will result in you being charged fees by both the ATM AND your bank. After all, it is an easy way for both your bank and the ATM operator to make money- at your expense.

Moreover, there is the matter of exchange rates. Unlike at banks or currency exchanges, the exchange rates are not updated regularly (which can turn out to your disadvantage), and will probably not be the best, or the market, rate. However, with equal certainty the rate quoted will be very good for the ATM operator- once again, at the user’s expense.

As such, study the relevant exchange rate prior to travel. This way, you know what to expect; what the usual conversion rate is, any trends, and the current rate of exchange. With this knowledge, the savvy traveller can quickly work out if the offered rate is good or not- even if they only have a few moments to decide whilst at a foreign cashpoint.

Counter intuitively, often the airport or major transport hub can be the best place to withdraw and exchange money abroad. Admittedly, the fees charged can be overly high. However, airports are set up to accommodate and deal with large numbers of foreigners coming in and changing money. Many currency change desks will be large, international companies, such as Travelex or Western Union; such companies are both reputable and reliable. Additionally, many established and reputable currency exchangers will offer a buy- back service, or similar service, which can only be of benefit to the customer.

If not withdrawing and converting money outside the airport or main transport hub, it goes without saying to use an established and trustworthy company. Don’t be another anecdote or statistic of yet another foreigner being scammed or ripped off by a rogue currency trader. The problem is, quite often such rogue traders are very convincing, or honest enough to convince the average person. Have time to think, and to properly evaluate what is being said and offered. Above all, listen to your instinct; does this deal or trader seem honest? Instinct, and the ability to read other people, is rarely wrong. Once again, knowing the relevant currency exchange rates prior to departure helps, as you know what rates you expect to be quoted.

Conventional wisdom has it that debit cards are better to use abroad than credit cards, giving better rates, amongst other benefits. However, credit cards can actually be better to use when abroad. If something goes wrong (fraud or similar), it is your bank who bears the burden, not you directly. There is often greater consumer protection for credit than debit cards. Indeed, when using a debit card abroad, you pay for things directly from your bank account; if things go wrong, there can be financial complications. Fees and charges will also be directly charged to your bank account. Using a credit card, although the fees will be greater, (and though it does come with the risk of running up big credit card debt) can often be a less risky method of payment and withdrawing cash when abroad.

Being knowledgeable and being aware of such matters surrounding withdrawing money abroad can make the hardest thing being deciding what to spend it on.

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